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Quote of the Day

 

“The near-complete failure of gold to protect against a loss in the purchasing power of the dollar must cast grave doubt on the ability of the ordinary investor to protect himself against inflation by putting his money in ‘things.’”

-Ben Graham

 

 

March 25th – This Day in Stock Market History

 

March 25th, 1809 – The first bank failure in the United States as Farmers Exchange Bank of Glocester, Rhode Island goes bust.

The bank was purchased by Andrew Dexter a year prior, who would exploit the current banking laws that allowed private banks to issue their own currency.

Dexter would print hundreds of thousands in bank notes, that should have been exchangeable for gold, with little gold actually backing the paper notes. When the bank failed, it was found that Dexter had $760,000 in bank notes outstanding, with just $83 in gold on hand.

Sources: The Exchange Artist: A Tale of High-Flying Speculation and America’s First Banking Collapse and, Ten Lessons Bankers Never Learn: How Banks Operate and Why Bankers Screw Up

 

March 25th, 1980 – The Hunt brothers receive a $135 million margin call from their silver dealer, after their attempt to corner the silver market had failed, and silver prices had fallen from over $40 per ounce to below $20. The Hunt brothers were unable to make the $135 million payment, and their broker began selling their silver supply on the market, leading prices to crash further. The margin call would lead to a spectacular day of panic on March 27th now known as “Silver Thursday”.

 

The price of silver reached its all time high January 18th, 1980, and had been slowly declining since. There were rumors that “someone” had been accumulating silver in massive quantities as the price rose towards the end of 1979 and into 1980. By march 1980 many were convinced it was the Hunt brothers:

 

NYT_critical_of_hunt_brothers

 

However, the Hunt Brothers’ game was up. On this day in 1980 they were forced to liquidate a large percentage of their silver to meet a margin call.

 

Source: Panic, Prosperity, and Progress: Five Centuries of History and the Markets


Best March 25th in Dow Jones Industrial Average History

1970 – Up 2.12%, 16.37 points.

 

Worst March 25th in Dow Jones Industrial Average History

1938 – Down 5.29%, 6.07 points.

 

 

Read of the Day

Gold: It’s Still a Pet Rock – By Jason Zweig

“Gold is insurance against chaos. Continually traded for millennia, it has tended to do well during periods of financial stress. Gold has also preserved its purchasing power over remarkably long periods. The same quantity of gold that a Roman centurion earned annually under Emperor Augustus (27 B.C. to A.D. 14) would cover one year’s pay ($46,500 to $65,000) for a U.S. Army captain today….

In October 2008, the depths of the global financial crisis, the gold price was 30% lower than it is now. In August 2011, when Standard & Poor’s downgraded the U.S.’s credit rating, gold was nearly 40% higher than it is now. Is today’s chaos that much worse than the financial crisis? Was the summer of 2011 so much darker than today?”


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Go To Next Day: March 26th, 1929 – As the euphoria rises and bubbles inflate, volume records at the NYSE shatter